Question 1

The FIFO method combines last period's costs as well as this period's costs in the calculation of unit costs.The FIFO method separates the costs of beginning inventory from the costs that were incurred during the current period.

Accepted Answer

The FIFO method does not combine last period's costs with this period's costs in the calculation of unit costs. Instead, it assumes that the oldest costs are the first to be sold, so the unit costs are based solely on the costs incurred during the current period.

Question 2

Which of the following statements is true?

Accepted Answer

In a process costing system, the production process is divided into distinct stages, and a separate Work in Process Inventory account is maintained for each stage. This allows for more accurate tracking of costs and progress throughout the entire production process. A job costing system, on the other hand, is used for custom or unique projects and would have a separate Work in Process Inventory account for each individual job. Raw materials inventory would also typically be tracked in a single inventory account, regardless of the costing system used.

Question 3

Which of the following is not a category used to reconcile the number of physical units using the weighted average method of process costing?

Accepted Answer

Cost of goods sold is not a category used to reconcile the number of physical units using the weighted average method of process costing. The categories used are units started, ending units in process, and units completed. Cost of goods sold is calculated using the total cost of units completed and transferred out of the process.

Question 4

Under the FIFO method,cost per equivalent unit is calculated by dividing current period costs by equivalent units.This is the formula for cost per equivalent unit under the FIFO method.

Accepted Answer

This statement is true.

Question 5

Cost per equivalent unit is calculated separately for direct materials and for conversion costs.Because equivalent units are different for direct materials and conversion costs,we must make a separate calculation for each category.

Accepted Answer

This statement is true as cost per equivalent unit is calculated separately for direct materials and conversion costs due to the difference in equivalent units for each category.

Question 6

The total cost of Work in Process incurred in one department during the period must be split between costs transferred to the next department and costs transferred to Finished Goods.The total cost of Work in Process incurred during the period must be split between costs transferred to the next department and costs remaining in the current department as Work in Process Inventory.

Accepted Answer

The answer of The total cost of Work in Process...

Question 7

Which of the following companies would most likely use process costing?

Accepted Answer

Process costing is used by companies that produce homogeneous products in a continuous flow, like a soft drink company.

Question 8

Under process costing when the product is through the last production process,the journal entry for total manufacturing cost includes a debit to Work in Process Inventory and a credit to Finished Goods Inventory.Under process costing when the product is through the last production process,the journal entry for total manufacturing cost includes a debit to Finished Goods Inventory and a credit to Work in Process Inventory.

Accepted Answer

The correct journal entry when the product is through the last production process is a debit to Finished Goods Inventory and a credit to Work in Process Inventory, not the other way around.

Question 9

The production report contains information about the number of physical units and equivalent units,but not their costs.The production report includes information about the number of physical units,equivalent units,cost per equivalent unit,and a reconciliation of the cost of work in process.

Accepted Answer

The production report includes information about the number of physical units, equivalent units, cost per equivalent unit, and a reconciliation of the cost of work in process. It provides information about both the quantities produced and their respective costs.

Question 10

Which of the following accounts will be treated differently by a process costing system than by a job order costing system?

Accepted Answer

The Work in Process (WIP) Inventory account will be treated differently by a process costing system than by a job order costing system because in a process costing system, the costs are accumulated by department or process rather than by job. In a job order costing system, each job has its own WIP Inventory account.

Question 11

Under the FIFO method,the units completed during the period must be split between beginning units in process and units started and completed.In FIFO,physical units are divided between beginning units in process,units started and completed,and ending units in process.

Accepted Answer

This statement is true. Under the FIFO method, the units completed during the period are allocated first to the beginning inventory, then to units started and completed during the period, and finally to the ending inventory. Therefore, physical units are divided between beginning units in process, units started and completed, and ending units in process.

Question 12

Selling,general,and administrative costs are included on the production cost report and included as part of cost of goods manufactured.Selling,general,and administrative costs are treated as period costs and expensed during the period incurred.

Accepted Answer

Selling, general, and administrative costs are not included in the production cost report and are considered indirect costs that are expensed during the period incurred, rather than being allocated to the cost of goods manufactured.

Question 13

(Beginning inventory + Current costs)/Equivalent units is the formula to calculate the cost per equivalent unit using the weighted-average method.This is the correct formula for calculating cost per equivalent unit.

Accepted Answer

This is the correct formula for calculating cost per equivalent unit using the weighted-average method.

Question 14

Which of the following is a characteristic of process costing?

Accepted Answer

Process costing is employed by companies that use standardized processes where the products are homogenous or uniform. Option A is incorrect because process costing is used for standardized products, which means they are not unique. Option B is incorrect because costs are traced to production processes, hence the name process costing. Option D is incorrect because process costing is used both in manufacturing and service firms.

Question 15

Which of the following is not a characteristic of process costing?

Accepted Answer

Service firms can use process costing, so option C is incorrect. Options A, B, and D are characteristics of process costing.

Question 16

Which of the following statements is incorrect regarding the production costing report?

Accepted Answer

The incorrect statement is that a separate production report is prepared for each major production process on an annual basis. The correct statement is that a separate production report is prepared for each major production process on either a monthly or quarterly basis.

Question 17

Which of the following companies would most likely use job order costing?

Accepted Answer

An auto body repair shop is the most likely to use job order costing. This is because each job is unique and requires different materials and labor, making it necessary to track the costs of each job individually. The other companies listed generally have a more standardized production process that would be better suited to process costing.

Question 18

Conversion costs consist of

Accepted Answer

Conversion costs include direct labor and manufacturing overhead. Raw materials are not included in conversion costs.

Question 19

Under process costing,the amount of under- or overapplied conversion cost should be transferred to Work in Process Inventory at the end of the period.Under process costing,the amount of under- or overapplied conversion cost should be transferred to Cost of Goods Sold at the end of the period.

Accepted Answer

Under process costing, the amount of under- or overapplied conversion cost is typically adjusted against Cost of Goods Sold, not Work in Process Inventory, at the end of the period.

Question 20

To reconcile the total cost of Work in Process Inventory,the costs that were in Work in Process Inventory at the beginning of the period plus any costs that were added during the current period must be accounted for.To reconcile the total cost of Work in Process Inventory,we must account for any costs that were in Work in Process Inventory at the beginning of the period plus any costs that were added during the current period.

Accepted Answer

This statement is true. Reconciling the total cost of Work in Process Inventory involves accounting for the costs that were in the inventory at the beginning of the period as well as any costs added during the current period.

Quiz 3: Process Costing